Tokyo gold futures slipped back on Tuesday as the yen regained ground against the dollar on strong Japanese economic data, but trade was thin and stuck in a narrow band ahead of a Federal Reserve policy meeting later in the day.
The benchmark June gold contract on the Tokyo Commodity Exchange settled down 12 yen per gram at 1,569, after moving between 1,565 and 1,571.
On Monday, the contract hit a 13-year high of 1,587 yen as the yen came under downward pressure from political woes.
Japanese Prime Minister Janitor Koizumi followed through on a threat to call a snap election after the upper house of parliament voted down his prized postal reform bills that day.
Some traders had expected political uncertainty to depress the yen and lift yen-based gold prices. But the currency has shown strength as market attention shifted from politics to economic fundamentals, leading to selling of TOCOM futures.
"The June gold could correct lower to about 1,550 yen later this week," one Tokyo broker said.
The US currency was down 0.4 percent at 111.75 yen, as the yen gained support from a 1 percent rise in the Nikkei stock average and data showing a solid increase in June machinery orders.
TOCOM activity was subdued as operators were awaiting the outcome of the Fed policy meeting, which could provide clues to direction in the currency market.
The Fed is widely expected to raise interest rates, delivering a 10th straight 25 basis point increase in its key funds rate, which would take it to 3.5 percent.
Higher US rates tend to boost the dollar and weigh on gold, which is seen as an alternative investment to dollar assets. Gold traders are also focusing on how long a strike by South African mineworkers will continue.
South African gold miners started their first industry-wide strike in 18 years on Sunday, demanding higher wages in the world's biggest bullion producer.
The gold market has barely reacted to the strike so far because the move was widely anticipated, brokers said. But a protracted strike could severely hurt gold production and push up prices, they said.
About 100,000 South African gold miners stayed off work on Monday, bringing mines to a standstill.
One lead negotiator representing gold producers estimated a daily loss of 40,000 ounces and 130 million rand ($20.2 million) in revenue due to the strike.
South Africa accounts for around 15 percent of global gold output. The strike has paralysed the South African mines of AngloGold Ashanti, the world's No 2 gold producer, fourth-ranked Gold Fields, sixth-placed Harmony Gold and South Deep.
Spot gold was quoted at $435.00/50 an ounce, steady from Monday's New York close of $434.60/435.40. In the platinum market, TOCOM's benchmark June contract closed up 4 yen per gram at 3,211.
Last on Wednesday, technically driven buying by funds pushed the June contract up to 3,254 yen, the highest for TOCOM's benchmark platinum since September 1986.
Spot platinum was quoted at $903.50/908.50 an ounce, up from $899/902 in late New York.
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